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Bull-bear tug of war keeps pepper volatile

G.K. Nair
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The pepper market continued to leave the impression that the market was running as per the whims and fancies of both the bull and bear operators. “There doesn't seem to be anyone to regulate the market,” trade sources alleged.

In fact, long position holders were in control of the market and were pushing up Dec contract and widened the difference between it and other active contracts.

They have been squeezing the market and rather compelling short position holders to buy back Dec and consequently, Dec contract went up significantly to close much above other nearby contracts.

As the long position holders were hammering down the long positions Feb and Mar contracts continued to fall in recent days. Consequently, the difference between Dec and Feb prices has gone as high as Rs 6,350 a quintal during the week. Besides, “Ulta badla”was also going on, but by short position holders who are forced to do it to get out of the market, market sources told Business Line.

Coupled with this phenomenon investors were buying back their sales in Dec contract and liquidating farm grade pepper with them in the market and that was being picked up by interstate dealers as the pipelines in most of the upcountry markets are said to be empty.

Good demand

Domestic demand is expected to pick up in the coming days because of the winter/wedding requirements. Besides, the end users demand is also going to pick up.

At the same time there have been no arrivals from the primary markets, at present, as Sabarimala pilgrims are said to be buying small quantities of pepper from Pathanamthitta, Kollam and Idukki districts. According to primary market dealers in Parakode (Pathanamthitta) and Punalur (Kollam), an estimated 5 to 7 tonnes of pepper are being traded daily and it is expected to increase as the number of pilgrim arrivals picked up.

Add to this, increased tourist arrivals to the state are also aiding retail black pepper business in the growing areas, they said.

Indian parity in line with Dec delivery prices continued to remain out priced at around $7,400 a tonne (c&f) for Europe and $7,700 a tonne (c&f) for the US. However, at the current prices, Feb and Mar were at competitive levels i.e., $6,600-6,700 a tonne (c&f) with other origins in the world market.

During the week, Dec contract on the NCDEX shot up by Rs 1,180 a quintal to close at Rs 38,980 at the weekend while Feb decreased by Rs 330 to close at Rs 34,065 and Mar declined by Rs 5 to close at Rs 33,785 .

Total turn over during the week fell by 7,168 tonnes to close at 16,651 tonnes on Saturday while total open interest dropped by 2,433 tonnes to close at 5,433 tonnes.

Spot gains

Spot prices, in tandem with the futures market trend and on limited activities, moved up by Rs 100 a quintal at the weekend to close at Rs 37,200 (ungarbled) and Rs 38,700 (MG 1) .

global scenario

Taking into account of stock brought forward from 2011, import and domestic consumption in 2012, around 85,750 tonnes would be carried forward as stocks for 2013. The stock is relatively small when compared to stock at the beginning of the year at 90,585 tonnes, according to International Pepper Community (IPC).

“The carryover for 2013 is expected to meet only the export demand before new material from next year crops arrive in the market. Under this situation, pepper price in the coming months is expected to remain high”, S. Kannan, Executive Director of the Jakarta-based IPC, told Business Line.

(This article was published on December 9, 2012)
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